Fair Equalization for Alberta

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Principle

 Alberta's fiscal contribution to confederation should be recognized, fair, and valued by the federal government and recipient provinces. 

 

Objective 

  • To restore the equalization program to its original, limited purpose of ensuring that all provinces can provide reasonably comparable levels of public service at reasonably comparable levels of taxation.
  • To re-focus the equalization program on providing less developed provinces with temporary economic and fiscal aid, and away from long-term dependency. 

 

Policy  

  • Refer a constitutional reference question to the Supreme Court of Canada to request a ruling on the constitutional validity of the inclusion of mineral royalties in, and the exclusion of hydro-electricity from, the equalization formula.
  • Hold a provincial referendum in Alberta to remove the equalization program from the constitution.

 

Background

Equalization 

The Constitution Act 1982 says that equalization is designed “to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public service at reasonably comparable levels of taxation.”

Yet, the program has grown so out of control that it no longer focuses on equalization, but rather on transferring wealth from one province to another.

A province that implements sound, fiscally responsible policies that stimulate economic growth – such as resource development – is now punished by having their wealth transferred to other provinces that implement poor, inefficient, and wasteful policies that harm their own economies, such as banning resource development.

If the equalization program cannot be confined to its original purpose, it should be abolished.

 

Constitutional Reference

The equalization formula has not always been as terribly slanted against Alberta as it is right now. The original version of the formula was based solely on the fiscal capacity of each province, and this was understood as tax capacity which did not include royalty revenues. Only later, when Alberta started receiving large amounts of resource royalty revenues, did the federal government start including these in its calculations. Royalties are the sale of an asset and should not a considered as a regular operational revenue source.

Alberta has the right to refer constitutional questions to the Supreme Court of Canada. In 1980, Premier Lougheed successfully used this tactic to challenge a portion of the National Energy Program. In 2019, the new Alberta Premier should repeat this approach by asking the Court to rule on the constitutionality of including resource royalties in the equalization calculations.

The Supreme Court has already ruled in other cases that royalties received from a one-time sale of a depleting asset are not the same as recurring tax revenue. Should this logic be extended to the equalization formula, the program will be significantly re-balanced towards its original purpose.

 

Referendum

In 1998, ruling on the Quebec Secession Reference case, the Supreme Court of Canada ruled that if Quebec were to hold a referendum on a proposed amendment to the Constitution, and the voting resulted in “a clear majority… on a clear question”, the federal government has “a constitutional duty to negotiate”, “in good faith”, with the province on that issue.

Crucially, the Supreme Court of Canada was explicitly clear that this duty to negotiate applies generally to any provincial referendum which receives a clear majority on a clear question, not just on that specific Quebec referendum.

Therefore, were Alberta to hold a provincial referendum with a clear question about removing the equalization program from the constitution, and receive a clear majority result in such a referendum, the federal government – whomever that might be at the time – would, at the very least, be forced to the negotiating table.

 

Sources 

http://www.wildrosecaucus.ca/wp-content/uploads/2016/10/EQFP-Reort-Final.pdf

https://www.manningcentre.ca/sites/default/files/response_to_federal_carbon_pricing-rs.pdf

http://business.financialpost.com/opinion/joe-oliver-why-equalization-no-longer-works/wcm/95b7c38e-bf8d-4f42-bb0d-9c10a8c66c0e